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What Is Demand Management?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 26 March 2014
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    Conjecture Corporation
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Demand management is a type of business strategy that seeks to project the demand for goods and services offered by a company and then arrange internal processes and procedures so that the demand may be met in a timely manner. As part of the process, demand management involves taking into consideration a wide range of economic factors that could impact the level of customer demand for a given period, changes that may affect the use of raw materials in the production process, and even the schedule of production that is maintained by the business. When successful, this type of management strategy will result in a distribution of goods and services that helps to keep customers happy and the reputation of the business positive.

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One of the key elements of any demand management initiative is to accurately forecast the level of demand that consumers will generate for the products offered by the business. Doing so helps to arrange the production chain of the company to best advantage. Orders for raw materials can be placed with delivery dates to ensure that inventories are kept low while also avoiding the possibility of an interruption in production due to a lack of resources. Production schedules can also be adjusted to fit the projected demand, helping to save on labor costs, utilities, and other expenses associated with manufacturing the goods. From this perspective, demand management is essential to the process of resource management, and can help keep the operating expenses of the business at a level that is more conducive to generating net profit.

The concept of demand management is also employed when it comes to attempting to influence the general movement of the economy. When government analysts accurately project demand within a given industry sector, it is easier to determine the likely impact that change in demand will have on the economy in general. From there, efforts can be made to minimize factors that may lead to a recession or some other type of undesirable economic condition, and slowly redirect the economy into a more positive direction. In this application, responsible demand management can aid in lessening the severity of an economic downturn while also possibly shortening the amount of time that passes before economic recovery begins to take place.

In any application, demand management is a useful tool in forecasting what will come to be and taking steps to arrange the use of resources to best advantage. With business operations, this may mean restructuring the supply chain and resource management functions to position the company to earn the best possible returns. As part of the wider task of predicting demand within an economy, this management approach makes it easier to identify upcoming trends and make use of resources to effectively promote positive movements while minimizing the impact of negative movements.

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